Are Short Term Loans Safe?

If your car broke down tomorrow, would you be able to afford a repair?

For many of us, unexpected repair jobs aren’t written into our monthly budget. In fact, we’d be lucky if our savings covered this unplanned expense. That’s where short-term loans and payday loans can come in handy.

What’s the difference between a short term and a ‘payday’ loan?

Usually, when you take out a loan from your bank, they expect you to pay it back over three or five years, sometimes even 10 years. Short term loans are different in that they are:

Usually a much smaller amount than a traditional loan, and

Designed to be paid back in 3 to 24 instalments over a relatively short time period.

Payday loans are a type of short-term loan that require you to pay back your debt on the next payday, hence their name. The repayment is taken out of your bank account in a lump sum so you need to always ensure you have enough coming in to cover the payment.

Beware borrowing over longer periods

If you’re stuck for money in a hurry, a short-term loan will tide you over and give you the time needed to pay it back. The reason many people like them is the financial flexibility they provide, as the funds are deposited directly into their bank account often straight away.

Short-term and payday loans are often available online at whichever time of day suits you best. This is great news for those who may be needing the money immediately but have left it until outside of business hours to try and visit a bank or loan office.

Additionally, though a bad credit score often discourages potential customers from taking out a loan, many short-term loan providers genuinely welcome and work with consumers whose credit history is not perfect.

Instead, they’ll look at whether you have a regular income, and, if you do, they compare it against how much you spend every month on your mortgage or rent, your utility bills, any other loans you have, and so on. It’s about the person you are now for many short term loan providers, not who you were two years ago.

Because there is no collateral involved in a short-term loan, you won’t need to worry about losing property or vehicles should you find yourself unable to pay the loan back.

Taking out a short-term loan should only be done if you’re confident that you’ll be able to meet the monthly repayment. Make sure that you make the length of time you have to pay the loan back long enough so that the repayments are affordable and you don’t put yourself under unnecessary pressure to pay it back.

Ensure you can afford the repayments

When short-term loans first appeared, their main selling point was the 24/7 availability. However, the APR% that many companies wanted from borrowers was often very high. This led to some customers getting themselves into more debt, so they could afford to pay back the short-term loans. The Government decided that people needed better protection, so they intervened in the situation using the Financial Conduct Authority (FCA).

To make short-term loans more customer-friendly, the FCA put strict rules in place which make them a safer and more secure choice. These rules are:

Initial cost cap is set at 0.8%. This means lenders won’t charge interest at more than 0.8% per day.

Default fees are set at a maximum of £15. If a lender charges a penalty for missing a payment, the fee you pay will never be higher than £15.

The cost cap for what you pay back on top of your loan is set at 100%. This means if you borrow £100, any late fees and interest incurred must never exceed £100 – the most you’ll ever have to pay back is £200.

Are short-term loans safe?

If you’re able to pay your loan back on time, they are safe. Just make sure that, before you make a decision to proceed, you:

Are only borrowing what you need,

Understand how you’re going to meet each monthly repayment, and

Have fully considered whether this is really the best decision for you.

Loans through Moneypod

Moneypod is not a lender – we’re an FCA-approved broker.

What that means is that, when people apply for a short-term loan, we look at all the information they give us and then match them with the most suitable short-term loan lender. We work with a panel of FCA-approved lenders. We check out all partners and how they treat borrowers before we deal with them – that means we’re very comfortable introducing you to them.

Moneypod can arrange loans of up to 24 months and you’re in control at all times. If you feel you wish to apply for a short-term loan and you’re happy that you can make all the repayments, please click here to start your no-obligation application.

* If your loan is approved, funds may be cleared and in your account in around 10 minutes.
This is subject to lender checks and clearing times. Our service software will find a match
offering the lowest APR rate possible within our network based on availability.

Lowest APR - Our software system uses sophisticated algorithms to search for and match your
application with a lender offering the lowest APR rate possible based on your current
circumstances. APR rates depend on specific factors and risk and range from 45.3% to
1575%.

Loan Amounts - Your actual loan offer may be less than what you applied for, this is because
every loan application is considered and dependent on affordability. Lenders will consider
loan period, income and outgoings so a decision might be to decline the requested loan but
may accept and present a lower amount offer. Applications may be accepted on a different
borrowing period; this is due to the circumstances of the borrower and the repayments of
the loan based on available income.

Consumer Advisory: Moneypod is a loan matching service. This site will submit the information
you provide to a direct lender. Upon loan approval, a direct lender may require further
information from you which will be collected after we transfer you to their website or they
may contact you via phone or email.

The operator of this site is not a direct lender. Loan terms, conditions and policies vary by
lender and applicant qualifications. Late or missed loan payments may be subject to
increased fees and interest rates. Not all lending partners offer up to £3,500 loans, and
not all applicants will be approved for their requested loan amounts. Loan repayment periods
vary by lender also. Lenders may use collection services for non-payment of loans.

Not all borrowers will qualify for a loan, the operator of this website does not engage in
any direct consumer lending, we simply provide a FREE loan matching service to the
public.

Representative: 278.2% APR

Representative Example: Amount of credit: £900 for 11 months at £154.90 per month. Total
repayment of £1,703.91. Interest: £803.91. Interest rate: 150% pa (fixed). 278.2% APR
Representative. Rates from 45.3% APR to 1575% APR - quotes and APR will be based on your
personal circumstances. Nouveau Finance Limited is authorised and regulated by the Financial
Conduct Authority and is entered on the Financial Services Register under reference number:
727348 We are a credit broker and not a lender and offer credit facilities from a panel of
lenders.

*Fund transfer times may vary based on the matched UK money lender, time of day applied and
your bank.